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It wasn’t necessarily the most memorable line in President Joe Biden’s State of the Union address, but for some lawmakers in attendance, it stood out.
“[B]y the end of this year,” the Democrat boasted, “the deficit will be down to less than half what it was before I took office.” Biden added that he would soon become the only president “ever to cut the deficit by more than $1 trillion in a single year.”
And while it’s impossible to say with certainly what to expect in the coming months, at least for now, the president appears to be on track to deliver on his boast. Bloomberg News reported yesterday:
The U.S. budget deficit shrank by more than half in the first five months of the latest fiscal year as government pandemic spending wound down and revenue jumped. The shortfall in the October-to-February period was $475.6 billion, 55% smaller than the same five months a year earlier, and the least for the timeframe since the fiscal year ended in 2018, according to Treasury Department data released Thursday. The gap narrowed to $216.6 billion last month, compared with $310.9 billion in February 2021.
The deficit in Biden’s first year was $360 billion smaller than the budget shortfall from Donald Trump’s final year in office, and in the Democrat’s second year, it’s on pace to be $1 trillion smaller.
There’s no great mystery as to why: As the economic recovery continues, and spending related to the pandemic becomes less necessary, the deficit is predictably getting much smaller in a hurry.
As for why anyone should care, there are a few angles to this to keep in mind.
First, there’s Sen. Joe Manchin. The conservative West Virginia Democrat, having already effectively killed the Build Back Better plan, has signaled a willingness to support some kind of new package, just so long as deficit reduction is part of the plan.
The White House can now credibly tell the senator his priorities are already being addressed — in nominal terms, at a pace without precedent.
Second, there’s recent history to consider. As The Washington Post’s Catherine Rampell explained before the Covid-19 crisis, “Federal deficits have widened immensely under Trump’s leadership. This is striking not only because he promised fiscal responsibility — at one time even pledging to eliminate the national debt within eight years — but also because it’s a historical anomaly. Deficits usually narrow when the economy is good and we’re not engaged in a major war.... Trump’s own policies are to blame for this aberration.”
That was plainly true. The White House and congressional Republicans swore up and down in late 2017 that they could slash taxes for the wealthy and big corporations without increasing the deficit because, as they repeatedly insisted, “tax cuts pay for themselves.” We didn’t need additional evidence that their ridiculous belief was, and is, wrong, but the evidence soon followed anyway.
Then, of course, the pandemic hit, at which point the annual deficit ballooned to over $3 trillion.
And finally, there’s the historical pattern. As we’ve discussed, when it comes to the deficit, Americans have endured a remarkably consistent pattern for four decades.
It starts with a Republican presidential candidate denouncing the deficit and vowing to balance the budget if elected. That Republican then takes office, abandons interest in the issue, and expresses indifference when the deficit becomes vastly larger. Then a Democrat takes office, at which point GOP lawmakers who didn’t care at all about the deficit suddenly decide it’s a critical issue that the new president must immediately prioritize.
During the Democratic administration, the deficit invariably shrinks — a development Republicans tend to ignore — at which point the entire cycle starts over.
As the cycle spins, polls continue to show that most Americans see Republicans as the party most trustworthy to reduce the deficit, despite reality, because some partisan branding is tough to change, even in the face of four decades' worth of evidence.